Sustainability Economics

Over the last several decades, changing attitudes about social problems has led to many firms and nations developing their own systems for measuring and discussing sustainability. From the perspective of investors, if there are two similar companies working on the same problem, and one is very sustainable while the other is not, then it’s a no brainer which one you should invest in. Investors from venture capitalists to small community banks, from hedge funds to pension funds have frequently developed their own systems to measure and discuss “how sustainable” a company, a country, or an economy really is. Being able to compare different financial entities on the basis of sustainability is a major advantage when considering who to invest in.

In 2015, after about 40 years of work, The United Nations released a set of Sustainable Development Goals which apply in very specific ways to companies, countries, cities, economies, etc. This was the result of over four decades of collaboration from the global community to define and measure sustainability. The UN SDGs have since become the de facto language for business discussions around sustainability.

Two years after the UN SDGs were released, Kate Raworth published Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist. This book presented a model for thinking about the economics of business and nations from the perspective of the UN SDGs. Check out the image below. The argument Raworth makes is that for each of the UN SDGs, there is a range where we can have sustainable development. For example, people need affordable housing. If there is not enough affordable housing, then you get homelessness. If there is too much housing, it is no longer sustainable to continue building housing. There is a range where it makes sense. This book is about defining and understanding the range for each dimension of sustainability. This applies to a neighborhood cafe, in a very similar way to how it applies to a national economy.

Why does it matter for you? Well whether you’re a consumer trying to be a better steward of the future or an entrepreneur trying to build a business that isn’t going to fold in a year, this perspective sheds light on pitfalls that can be avoided, and centers the conversation on building things that last.